Jagged and wrong looking shadow on hair particles
@Leon Cheung is almost right.

The hairs are coming out exactly parallel to the normal. Because all the hairs on each face are pointing exactly the same direction, the shading on the hairs is going to change sharply at the edge of each face, even though you're using smooth shading. 

One way to solve this "problem" is tweaking the Random value on the children. This will prevent the hairs on one face from all pointing exactly the same direction. Another thing you can tweak is the random rotation. Just add a very small amount of randomness, and this will also keep them from all facing the same direction.

These solutions should work without having to make your hairs longer.